BILL NUMBER: AB 583	CHAPTERED  09/21/99

	CHAPTER   441
	FILED WITH SECRETARY OF STATE   SEPTEMBER 21, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 21, 1999
	PASSED THE ASSEMBLY   AUGUST 26, 1999
	PASSED THE SENATE   AUGUST 23, 1999
	AMENDED IN SENATE   JULY 14, 1999
	AMENDED IN ASSEMBLY   MAY 3, 1999

INTRODUCED BY   Assembly Member Papan

                        FEBRUARY 19, 1999

   An act to amend Sections 17005.6, 17200, 17400, 17403.1, 17403.2,
17403.3, and 17403.4 of, to amend and renumber Section 17005.5 of, to
add Sections 17004.5, 17005.5, and 17215 to, and to repeal Section
17401 of, the Financial Code, relating to escrow.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 583, Papan.  Internet escrow agents.
   Existing law, the Escrow Law, provides that it is unlawful for any
person to engage in business as an escrow agent within this state
unless by means of a corporation licensed to do so.
   This bill would make provisions of the Escrow Law applicable to an
Internet escrow agent, defined as any person engaged in the business
of receiving escrows for deposit or delivery over the Internet, as
specified.
   This bill would make related changes.  Among other things, the
bill would define "within the state" for purposes of determining the
application of the Escrow Law to a transaction to include specified
activities.
   With respect to rules and regulations adopted by the Commissioner
of Corporations under the Escrow Law, the bill would authorize the
commissioner to waive requirements, as specified.
   The bill would make conforming changes.
   Since a willful violation of the Escrow Law is subject to a fine
and misdemeanor or felony imprisonment, this bill would expand the
scope of that crime and impose a state-mandated local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  (a) The Legislature finds and declares all of the
following:
   (1) California's electronic technology and Internet related
industries have been critical sectors of California's economic
resurgence.
   (2) California is the leading high technology state in the nation
and is the home to many electronic technology and Internet related
companies that generate substantial employment and state revenues.
   (3) Electronic commerce is predicted to become a critical
component of future economic development.
   (4) It is important to California's continued economic health that
state government work with California's electronic technology and
Internet industries to promote an industry friendly environment so as
to foster further innovation and development for the benefit of the
people of this state.
   (b) Therefore, it is the intent of the Legislature that state
government recognize the unique and rapid technological advances
changing electronic commerce and facilitate the development of
Internet related commerce, and, while maintaining consumer protection
as its highest priority, work to resolve issues presented by laws
and regulations that may hamper the development of electronic
commerce.
  SEC. 2.  Section 17004.5 is added to the Financial Code, to read:
   17004.5.  "Internet escrow agent" means any person engaged in the
business of receiving escrows for deposit or delivery over the
Internet.
  SEC. 3.  Section 17005.5 of the Financial Code is renumbered to
read:
   17005.3.  "Person subject to this division" means any person
undertaking the performance of escrow agent services.  Unless
specifically exempted, as in Section 17006, however, this definition
shall not be used to exclude anyone.
  SEC. 4.  Section 17005.5 is added to the Financial Code, to read:
   17005.5.  "Within this state" means any activity of a person
relating to receiving escrows for deposit or delivery that originates
from this state and is directed to persons outside this state, or
that originates from outside this state and is directed to persons
inside this state, or that originates inside this state and is
directed to persons inside this state, or that leads to the formation
of a contract and the offer or acceptance thereof is directed to a
person in this state, whether from inside or outside this state and
whether the offer was made inside or outside this state.
  SEC. 5.  Section 17005.6 of the Financial Code is amended to read:

   17005.6.  Except as provided for in Section 17004, "escrow agent"
as used in this division includes joint control agents and Internet
escrow agents.
  SEC. 6.  Section 17200 of the Financial Code is amended to read:
   17200.  It shall be unlawful for any person to engage in business
as an escrow agent within this state except by means of a corporation
duly organized for that purpose licensed by the commissioner as an
escrow agent.
  SEC. 7.  Section 17215 is added to the Financial Code, to read:
   17215.  Whenever the commissioner issues a license or order under
this division, the commissioner may impose conditions that are
necessary and appropriate to carry out the provisions and purposes of
this division and, with respect to Internet escrow agents, are also
consistent with the intent of the Legislature.
  SEC. 8.  Section 17400 of the Financial Code is amended to read:
   17400.  The commissioner may from time to time make, amend, and
rescind the rules, forms, and orders that are necessary to carry out
the provisions of this division, and define any terms, whether or not
used in this division, insofar as the definitions are not
inconsistent with the provisions of this division.  For the purpose
of rules and forms, the commissioner may, among other things,
classify persons and matters within the commissioner's jurisdiction
and may prescribe different requirements for different classes.  The
commissioner may, in the commissioner's discretion, waive any
requirement of any rule or form in situations where in his or her
opinion the requirement is not necessary in the public interest or
for the protection of the public.
  SEC. 9.  Section 17401 of the Financial Code is repealed.
  SEC. 10.  Section 17403.1 of the Financial Code is amended to read:

   17403.1.  No person subject to this division shall describe as an
escrow, whether orally, in writing, or electronically, any
transaction that is not defined as such in Section 17003.
  SEC. 11.  Section 17403.2 of the Financial Code is amended to read:

   17403.2.  (a) No person subject to this division shall solicit or
accept an escrow instruction or amended or supplemental escrow
instruction containing any blank to be filled in after signing or
initialing of the escrow instruction or amended or supplemental
escrow instruction, nor permit any person to make any addition to,
deletion from, or alteration of an escrow instruction or amended or
supplemental escrow instruction, unless the addition, deletion or
alteration is signed or initialed by all persons who had signed or
initialed the escrow instruction or amended or supplemental escrow
instruction prior to the addition, deletion or alteration.
   (b) In addition to subdivision (a), no Internet escrow agent
subject to this division shall solicit or accept electronically over
the Internet an escrow instruction or amended or supplemental escrow
instruction containing any blank to be filled in after executing that
escrow instruction or amended or supplemental escrow instruction,
nor permit any person to electronically, over the Internet, make any
addition to, deletion from, or alteration of an escrow instruction or
amended or supplemental escrow instruction, unless that addition,
deletion or alteration is executed by all persons who had executed
the escrow instruction or amended or supplemental escrow instruction
prior to the addition, deletion, or alteration.
  SEC. 12.  Section 17403.3 of the Financial Code is amended to read:

   17403.3.  (a) At the time of execution a copy of each escrow
instruction or amended or supplemental escrow instruction shall be
delivered to all persons executing the same.
   (b) Internet escrow agents shall deliver electronically over the
Internet a copy of each executed escrow instruction or amended or
supplemental escrow instruction to all persons executing the same.
In the event a person is not able to electronically receive the
instructions, the Internet escrow agent shall mail a true and correct
copy of the instructions to the person within 24 hours of execution.

  SEC. 13.  Section 17403.4 of the Financial Code is amended to read:

   17403.4.  All written escrow instructions and all escrow
instructions transmitted electronically over the Internet executed by
a buyer or seller, whether prepared by a person subject to this
division or by a person exempt from this division under Section
17006, shall contain a statement in not less than 10-point type which
shall include the license name and the name of the department
issuing the license or authority under which the person is operating.
  This section shall not apply to supplemental escrow instructions or
modifications to escrow instructions.
   This section shall become operative on July 1, 1993.
  SEC. 14.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
